presidential debate where president obama said he called this an act of terror and asking if that was true why on september 16 did he send rice out to say it was about a video? that is tomorrow. >>shepard: the news begins anew on "studio b." the president today holding the first news conference since re-election. reporters grilled him on immigration to the fiscal cliff to the affair of david petraeus. plus the feds investigating material they seized from the biographer and alleged mistress' home to help the prosecution to decide whether to file charms. general petraeus him sex has now agreed to testify before congressional leaders about the attack in benghazi that killed four americans including our ambassador to libya. it is all ahead unless breaking news changes everything. this is "studio b." >> first from fox at 3:00 in new york city, the president facing a wide range of questions today at white house. we start with the scandal that

brought down david petraeus. president obama says there is so far no evidence that general petraeus' affair compromised any government secrets. >> i have no evidence at this point from what i have seen that classifyied information was disclosed that in any way would have had a negative impact on our national security. >>shepard: the president said this is an ongoing investigation and could not comment on specifics. why the white house did not learn about the scandal in election day the president had this to say. >> if we had been told you would be sitting here asking why were you interfering in a criminal investigation. it is best right now just to see how this process unfolded. >>shepard: the president addressed the fiscal cliff and the administration's response to the attack in benghazi. now to wendell at the white

house. the families of some of the victims of the attack have criticizeed the government's response and the president dressed that today. >> he d he said the government did all it could. there has been criticism of no decision being made to send military forces there, although officials were watching parts of the attack in real time over a drone. defense secretary panetta said they could not see clearly enough to making make a more aggressive response that would have killed civilians. here is the president's response. >> if people do not think we did everything to make sure to make sure he saved the lives of folk who i sent there, and who were carrying out missions on behalf of the united states, then you don't know how our defense department thinks or our state department thinks or hour c.i.a.

thinks. their number one priority is to protect men lives. >>reporter: secretary of state, hillary clinton says there is risk serving america in countrieses like libya. >>shepard: he came to the defense of the ambassador rice. >>reporter: many think she has lost her chance to be on the short list for secretary of state because of her saying a week after the benghazi attack that it grew out of a roast of the anti-islam film. the president would not confirm she is on the short list of people to replace secretary of state, hillary clinton who is leaving but he went after senator john mccain and graham who say they do not trust her. >> if senator john mccain and senator graham want to go after someone they should go after me. i am happy to have that discussion with them. for them to go after the u.n. ambassador would had nothing to do with benghazi and was simply

making a presentation base the republicans are trying to see would will blink over extensions of the bush operation upper income tax cuts. the president says raising those taxes and corporate taxes would account for half the money needed to avoid the automatic tax hikes and spending cuts the fiscal cliff is made up. he turned the question around warning against letting taxes go up on the middle class. >> what doesn't make sense. our economy can't afford that right now. certainly no middle class family can afford that right now. nobody in either party says they want it to happen.

>>reporter: the president begins talks with congressional leaders on friday and they have until the end of the year to reach an agreement. >>shepard: paula broadwell who had an affair with general petraeus admitted she took documents from secure government buildings. you may recall the day before yesterday the agents spent four hours searching her home in charlotte, after the reporters were told the investigation was over and then suddenly there was this. we will report, you decide. they left with move a dozen file boxes, a couple of computers and a briefcase and a printer as an intelligence officer in the military reserve, broadwell did have a security clearance to review certain documents but that did not give her the authority to take certain materials home. federal and mill their officials are now sorting through that evidence to help the prosecution decide whether to file any charges. jennifer griffin with this angle of the story. does she face any consequences

from the military for her affair >>reporter: good question. we have been asking the army that question and we have not been getting answers. paula broadwell was a reservist in the military intelligence, army military intelligence, a lt. colonel, she did have clearance at one point to certainly view classified information, not necessarily to take it home, but she could review it. she is not a mobilized army reservist. it is not clear if she still has that clearance if she is not mobilized. the am avoided answering the questioning about whether she could face charges for the extramarital affair under the uniform code of military justice because it is not dealer -- clear if she was active. the f.b.i. has no evidence that david petraeus provided classified documents to her. >>shepard: the other woman, general petraeus we learned, came to the aid of the tampa

socialite jill kelley's twin sister, natalie. >>reporter: both of these sisters, they are twins, faced pretty steep debt and natalie was also involved in a very sticky custody battle and both of these sisters cultivated relationships with powerful men in washington and generals who were rising stars at central command. natalie was involved in a custody battle with a former bush administration official and general petraeus wrote a letter on of behalf of natalie appealing to a judge in the custody battle "we hosted them and the kelley family for christmas dinner this past year" and in each case we have seen a very love willing relationship between natalie and her son. the judge wrote "she appears to lack any appreciation or respect for honesty and integrity."

>>shepard: thank you. with us the journal list and author of 19 boxes on intelligence and current affair affairs, and he broke the secret service prostitution scandal with books "inside the c.i.a." and "secrets of the f.b.i." do you have a sense yet for whether this thing becomes something or continues to be mostly about affairs? >>guest: it will continue mostly to be something important. there are too many people covering up, i got a call on october 10 from a long-term f.b.i. source who tells me about the whole investigation about general petraeus and said the whole thing is being kept in abeyance until after the election when general petraeus will be asked to resign. so, i was, that sets it up for me that, in fact, there was a political decision to delay the investigation and the result is that during that time, four or

five months when he was under investigationing he was if this position where he could have been compromised by russian foreign intelligence, for example, if they got on to the affair and blackmailed him and that is why government employees are fired if they have security clearans and they become involved in compromising situations. i was told by fbi people that if this happened at the f.b.i. with a high ranking f.b.i. executive he would be fired the same day. so that is the seriousness. president obama really was disingenuous today by saying, well, if i had been told given the criminal investigation i could be accused of meddling. each week the f.b.i. director meets with him and briefs him on that very matter, criminal investigation such as terrorism and espnu nothing and certainly anything involving a high level

official of the administration where it is possible there could be a compromise and the person had to be fired. he still is not telling the full story of what happened and my f.b.i. people say there is no way the fbi would have held up on this until after the election unless given the order from certainly the tone yen and, possibly, the president. >>shepard: the president says he doesn't know. is there evidence to the contrary? >>guest: i don't accept that he didn't say that, i am not sure if that is the same as saying i was not told. but, either way, it is so impossible to believe that he was not told about something involving --. >>shepard: the entire thing is impossible to believe if you wrote it for the afternoon soaps, it would go the way of the afternoon soaps. >>guest: exactly, including a

stupid f.b.i. agent who took the photos of himself shirtless. >>shepard: as it turns out that was a picture of the f.b.i. agent and others we are led to believe were at an affair and people had shirts undone and but i hear you, it's --. >>guest: don't we all send shirtless photos. >>shepard: no, thankfully. nice to see you. thank you for being here. all matters we will follow-up in the days, weeks, and months and my fear, years to come. paula broadwell admitted she took government documents and judge napolitano weighs in on that and the former c.i.a. director will testify about the deadly attacks in libya. you can be sure lawmakers will ask if the f.b.i. investigation in benghazi had an impact on each other.

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>>shepard: the file reports that general petraeus' biographer and alleged mistress is cooperating. the feds are investigating materials they seized from her home. judge napolitano is with us, our senior judicial analyst. there is a lot to mull over author of "theodore and woodrow ." >>judge napolitano: i have been defending general petraeus' constitutional freedom, he may have betrayed his wife but he entitled to the protection of the law as is miss broadwell. we don't know her level of security clearance she has. there are three levels.

bradley manning had the lowest, and mrs. broadwell had a level in between that and the president. so the question is not did she have any classified materials, the question is, did she have classified materials to which she was thought entitled? her legal of clearance she is entitled to a broad array of classified material so the f.b.i. has to go through the material and decide if each is above her level in which case they will ask where she got it or in her level and they will not ask her. >>shepard: the big picture, how did they get past thert of e they look to see if any crime was committed, came to the conclusion they did not but they kept going into people's stuff. >>judge napolitano: you put your finger on it. that is interesting. we start with a case that may have commenced with an f.b.i. agent willing to use the f.b.i. to deliver a favor to his friend. if this case started because

mrs. kelley's friend in the f.b.i. decided to look into who was sending her this e-mail, and it was mrs. broadwell, if it started out for an improper reason, it didn't start out because the f.b.i. had evidence of criminal activity, which is what they supposed to have, then everything they found as a result of that investigation is questionable as to whether it could be used in any prosecution. the f.b.i. itself said, whoever leaked this stuff, there is no criminal or national security implication is the question, why did you keep investigating in just because the guy's name was general petraeus? you should have stopped when you found out. found out there was no criminal activity. but they didn't stop. they kept digging and decided to electric. the president must have known about it before election day. i fully grow with our guest who knows more about the f.b.i. than any non-f.b.i. agent and there

are more pieces to the puzzle that need to come out. >>shepard: the president said he did not know. you mention this matter of no criminal activity, there are rules that protect americans no matter who they are and when the initial claim for me or you is, i'm getting harassing e-mails, well, that barely passes muster with your e-mail much less with the f.b.i. unless you are somebody and we are not sure who all the somebodies are. >>judge napolitano: this somebody, david petraeus was a big target. >>shepard: i am talking about jill kelley. >>judge napolitano: unless she has a friend in the f.b.i. the f.b.i. did not admit this is how it started but if it started with a personal friend, a federal agent using the f.b.i. to deliver a favor, he has serious problems and the investigation has serious problems because it started with an improper purpose and,

therefore, what is learned in this investigation that was started with an improper purpose is a doubtful validity as evidence to prosecute anyone who may have committed a crime. >>shepard: shirtless photo sender "the friend" jill kelley says i am getting harassing e-mails and shirtless f.b.i. agent takes it to the f.b.i. and the f.b.i. opens an investigation and walls starting falling all over the place in the middle of privacy laws for americans. we will see where it goes. there could be something bad that happened or they could be overstepping. we will find out? >>judge napolitano: we will talk about it for a while. there are a lot of missing pieces to the puzzle. >>shepard: another major developing story, israeli sources say they have killed a top commander in hamas group and now both sides are sending out serious threats. i'm talking very serious. this guy wasn't just anybody, either, he was captured on the border with lebanon in 2006 and

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>>shepard: a major militant take down with analysts calling the killing of israel's osama bin laden. the israeli army reports an airstrike killed a top commander in the militant group hamas as part of a new wave of deadly attacks in the gaza strip and the leader was at the top of israel's most wanted palestinian militants list. now the israeli prime minister binyamin netanyahu who is up for re-election and was hurting before today says his military is ready to expand its operation

in gaza further, an operation that hamas claims would "on the gates of hell." he -- we have a reporter on scene. leland? >> it has been a wild night. dozens if not hundreds of explosions behind me in the gaza strip and over the missiles are flying out of gaza towards a number of israeli towns. things escalate in the middle east quickly. this began before sundown with the assassination of the top hamas military commander. it shows the amount of real time operational intelligence the israels have. they have been planning this operation for a while. they put it into motion quickly. they killed him, a couple of other hamas targets and then began systematically taking out a number of facilities inside gaza used by hamas.

tonight it is dark and still there are teams in the area and we hear the buzzing of the drones in the year that continue to target stuff inside of gaza. hamas for their part has a funeral tomorrow to bury their dead tomorrow. they say the retaliation will begin. it will put will million or so people inside the gaza strip in very much harm's way. >>shepard: hamas threated to attack not just along the border, there, but, also in tel aviv which is a dramatic escalation. are military leaders planning for a long war, is that the thinking? >>reporter: they say they have ground forces on site. (inaudible). >> the prime minister today said in a president clinton -- in a press conference said they would

take out the long-range missiles. but if there anything less in the gaza strip you can bet they would certainly use them. if they do, that is an escalation calling for a ground war by the israelis going forward the egyptians who have a large part of this in terms of talking to hamas and trying to broker a cease-fire have recalled the ambassador in protest. it will be a dicey game to see if the egyptians will talk with the israelis and talk with hamas or keep staying on the side of hamas. >>shepard: you may have noticed audio changes, we had him by what amounts to an internet hookup which fail asked he switched over to the phone, difficult connections in that part of the world along the bodier with the gaza. we will keep on that. general petraeus is no longer the c.i.a. director. but he will talk to congress. he will do so tomorrow. that is as it was scheduled.

why some lawmakers are questioning the initial statements about the attack and new details of the florida socialite who triggered the f.b.i. investigation that led to his downfall. how does one woman get access to so many generals at central command? [ forsythe ] we don't just come up here for the view up in alaska.

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at the bottom of the hour and time for the top of the news. former c.i.a. director david petraeus will testify tomorrow on the attack in benghazi in keeping with the original plan before he resigned last friday over the extramarital affair and whatever else. lawmakers say the scandal should not keep the general from talking to the house of representatives and senate intelligence committee about attacks that killed ambassador and three other americans. in the days that followed the a attack there were mixed messages and key is an account from c.i.a. director david petraeus. some question whether that could have influenced what he told congress about the benghazi attack. catherine is in washington, dc. one lawmaker making a serious charge that the director had to know he wasn't being honest. la-la >>reporter: lawmakers

are questioning whether he knew he was the subject of an f.b.i. investigation and whether it impacted statements or professional duties. in a classified briefing on september 14, lawmakers tell fox director petraeus was wedded to the explanation of the obama administration that it was linked to the video and a demonstration that spun out-of-control. this is in stark contrast to a briefing on september 13, from the f.b.i., where they were told the evidence pointed to al qaeda. >> the documents we see that the c.i.a. had, the information they had, prior to general petraeus coming in it is impossible to believe he thought he was giving us honest testify. >>reporter: through the personal contact the general has insisted the resignation was not connected to ben goes. >>shepard: and the calls for a special committee? >>reporter: right now we have three tracks to the investigation: the first track

is the warnings, the request for supreme court by the consulate that were denied before the attack. the second track is the administration's statement that it was a demonstration that spun out-of-control and response to the video. and, now, the third track, whether former director petraeus the statement to congress of the attack was impacted by the knowledge he was the focus of an f.b.i. investigation for his affair for the biographer, paula broadwell. >> if there was ever a time in recent history for the conditioning to follow models we have used in the past it is ben goes. watergate investigation benefited from a joint select committee. iran contra benefited from a select committee. finding the truth about benghazi is only possible if you combine the resources of the three committees. >>reporter: today as he entered his office on capitol hill, harry reid was thrown a question by reporters on the plan for a special

investigation. (inaudible) a short time ago senator lieberman was asked a similar question and he thought the committee should investigate, first, and then possibly set up a new panel after that. >>shepard: it is clear that the president realizes that ambassador rice is a flash point. he seemed to be protecting her for lack of a better word. >>reporter: that is right. this morning the senators at the news conference said they would do what it takings to step the promotion of susan rice as secretary of state after she went on the five sunday talk shows and repeated based on the spunintelligence it was a out-of-control and the president said to republicans today, bring it on. >> she has done exemplary work. she has represented the united states and our interests in the

united nations with skill and professionalism and toughness and grace. as i have said before, she made an appearance at the request of the white house in which she gave her best understanding of the intelligence that had been provided to her. if senator john mccain and senator graham and others want to go after someone, they should go after me. >> two key points here, that was from the president on why susan rice was the one chosen for the sunday talk shows because a lingering question we put to the white house is why they didn't choose someone lick the c.i.a. director, the director of national intelligence, the national security advisor, or the white house counterterrorism advisor because it seemed like calling in ambassador right was like calling in the electrician

when the plumbing was broken because she is not an intelligence professional. second, the president said susan rice gave the statements based on the best intelligence given to her. who gave her that intelligence? former c.i.a. director david petraeus would now has resigned because he felt he could not continue to serve in an honorable way because of this affair. >>shepard: thank you, catherine. and now the assistant managing director for the the "wall street journal," parent company of this network. something is not right. we were all hearing and learning lou official channels this was a terrorist attack before ambassador rice was saying it wasn't. >>guest: congress is getting mixed signals, too, and our national security correspondent in washington, dc, has been written on this extensively. the discussions that are going to occur with david petraeus appears before the intelligence

committee, they are going to deal with this scope of things, and, in addition to would knew what and when and how was it communicated to washington, dc, and which part of washington, knew what, and when, the white house? the c.i.a.? the f.b.i.? all different. there will be discussions of how was security handled in benghazi? there was a large security contingent with the c.i.a. group. this was an informal relationship with the consulate. the consulate relied on that security team. that was part of the c.i.a. was that sufficient to assure security for the consulate? can you call in someone from another agency to provide you security if you need it suddenly? all these things will be discussed. >>shepard: there is a matter of who told susan rice and i suppose if i'm the united states ambassador to the united nations and i want dead know what happened somewhere like this i might call the director of the c.i.a. >>guest: right. >>shepard: and the director of

the c.i.a. is the one who also is saying this was about a movie. >>guest: or you get it from the white house who got it from the c.i.a. it may not have been directly --. >>shepard: i wonder if the line might become, i don't know, could become susan rice got it from david petraeus would has resigned. >>guest: the question is, was david petraeus being a good soldier, a team player by repeating what the white house was saying? was the white house behaving completely professionally, that was the best information it had getting it from the c.i.a.? or was the white house playing down the possibility of an al qaeda attack because it was right before the election they didn't want it to seem that al qaeda was on the rise again. some of this will be the fog of war, some of it could be soldier playing team player. we don't know. >>shepard: we don't. we hope to find out. that could we begin tomorrow.

thank you, john bussey. the tampa socialite bill kelly, this is interesting, jill kelley sparked the investigation that took own c.i.a. director david petraeus. she called shirtless file agent, i need your help. and the fbi started the investigation and now we have generals floating out there. she is accused of exchanging, and she knew this at the time, tens of thousands of pages of e-mails, think of that, not e-mails but pages of e-mails, with general allen over two or let years, the top commander in afghanistan, leading the longest war in the history of the country, an official said the mails they shared amounted to "phone sex over e-mail." pentagon officials say general allen insists he has done nothing wrong. jill kelley, her husband, and her twin sister, hosted the

awesome parties for top military officials and that is how she get to know the yens and all them including both general petraeus and general allen, and while the kelleys are living this licksure russ -- this luxury life, their home has been in foreclosure since 2010 and they were in big financial trouble. jonathan hunt is here. what else do we know about jill kelley? >> she is 37. her family is originally from lebanon and moved to the united states in the 1970's and she grew up in philadelphia and moved to tampa, florida, after marrying a surgeon. she seemed to have made a concerted effort to become part of high society. frequently mentioned in the society panels of the tampa tribune hosting lavish parties attended by generals and politicians, and she was given the unofficial title of

"honorary ambassador" by officials at the local air force base that she tried to invoke in the 9-1-1 call complaining about the media camped outside her home. we heard from her brother who said we should not prejudge this woman. >> if you know my sister, she is number one, a mother. she has three kids. number two, a i've. so after that, everything else is just...a side attraction. she is very dedicated to her husband and her kids, so something like this is pretty much a fluke. for anyone to paint her other than that is wrong. >>jonathan: everything you ever wanted or did not want to know we are finding out about them including the fact that according to court records not

just the current home in foreclosure but at times they have run up debt totaling hundreds of thousands if not millions of dollars. >>shepard: and this is jill kelley and her sister, at the same time, who has been described in interesting way including by the courts, was involved in a custody dispute which did not go her way, she lost custody of her chill -- child and the two generals got involved. >>jonathan: this is the twin sister, natalie is her name, and she has been just as much on the social scene down in tampa as her sister meeting all the top generals and politicians. the form governor of florida, charles crist, was asked how well he knew the two sisters and the husband. >> it is a sad situation. what can you say? >> you know the family? >> not well but i know them. >> have you dated natalie as some reports have said? >> in. >> denial he dated natalie. on the subject of jill kelley it

is worth pointing out that many military bases around the world, u.s. military bases have these kind of connections with women who they call honorary ambassadors, social liaisons and i have been on the bases and met women who perform that role and there is in suggestion that jill kelley has done anything illegal whatever. she may just have been caught up in this tangled web and obviously very enthusiastically embraced her duties as honorary ambassador. >>jonathan: i have met women who do that on different bases around the world. >>shepard: ambassador of hats and balloons. thank you. the president also is facing tough questions over his proposal if more than $1 billion in tax hikes on corporations and the wealthy which is the same

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>>shepard: just in to fox news, the military has suspended the air force base pass of the tampa socialite who sparked the ongoing sex scandal, jill kelley. and the pentagon spokesman said the decision to suspend her pass to the air force base in tampa was made in the last couple of days. jill kelley's complaints triggered investigation that led to the resignation of can david petraeus and the probe of the muses between her and the top commander in afghanistan. the spokesman said it was decided the pass suspension was in the best interest of the air force base community. she can still enter the base but now must report to the visiters signature mall and sign in like

every other civilian. now the pass gone. >> president obama faced much more than just the scandal surrounding general petraeus in the new conference defending proposal for tax hikes of $1.6 or the suspension of the bush tax cuts for big business and the wealthiest americans. >> we should not hold the middle class hostage while we debate tax cut for the wealthy. we should at left do what we agree on and that is to keep middle class taxes low. and offering everyone to sign right away to give folks certainty before the holiday season. >>shepard: before we fall off the fiscal cliff with tax hikes and spending cuts in january.

if there is no deal we will go back in recession. the increase of the president is double the amount that speaker boehner offered last year and many top republicans say the government should not be raising taxes on everyone. gerri willis is with us, in other than bill kristol said this will not kill us. he pointed out under president reagan taxes on the rich were 50 percent and that was the highest tax rate and we did well. >>gerri: what bill kristol said we would be okay if we raised taxes on people would on the other hand $1 million or more but not specifically addressing what the president said which is raising taxes on people who earn $250,000 or more which is opposed by some democrats here in new york city. >>shepard: no one wants to pay more taxes. what the president is doing he is not saying $250,000, to observers it sounds as if he is ready for compromise. he said he is ready for

compromise. >>gerri: and today he met with a dozen corporate leaders from the biggest corporations, walmart, g.e. and chevron, at least six of them in the meeting today have already served on either the president's jobs council or other councils the president has had and lot of people discussing what to do with the fiscal cliff. interesting to see if they will get anywhere. the big question, where were the people from wall street and where the small business people? >>shepard: well, the truth is, the president has veto penn and doesn't have to extend this and the republicans can come to the table and sign off on extending the tax cuts. or not. it is up to them. but the rich will pay more. he just won. >>gerri: that is what he said in today's press conference. >>shepard: lawmakers talked to the head of the familiar suit

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>>shepard: no answers from the owner of 9 massachusetts pharmacy at the center of the deadly meningitis outbreak. the head of the new england compounding center which produced the tainted void shots today declined to testify before a congressional committee. >> what explanation can you give the families would have lost their loved ones and those who are gravely ill for the actions of your company? >>guest: on advise of council i decline to answer on the basis my constitutional rights and privileges including the 5th

amendment to the united states constitution. >>shepard: lawyers say he recommended the client not comment because of ongoing federal and state investigations. the investigations have linked the case to that facility. the centers for disease control now reports that the outbreak has killed 32 people and sickened 450 people in the states on this map in yellow. jonathan is if atlanta, home to the centers for disease control. jonathan, today we heard from the widow of a victim. >>guest: that is right, a widow who lost her husband back in accept and she had some emotional testimony, a long time circuit judge developed severe symptoms after receiving back pain injections produced by the new england compounding center. listen to her. >> whoever is responsible i want them to know their lack of attention to their cuts cost my

husband his live. >> she testified to put a human face on the case numbers we keep seeing in this outbreak, traced to the company, a bipartisan effort to determine whether the outbreak could have been prevented. we will see a debate over whether it is an isolated case best handled by the courts or whether it is a symptom of a need to beef up the f.d.a.'s ability to regulate compounding pharmacies which currently are mostly regulated by individual states. >>shepard: thank you, jonathan. and before we go, the dow is off 1.5 percent. that is ahead.

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>>shepard: approaching the top of the hour in business news, and we are looking at the last of the stock market at the stock exch